MOODY'S ASSIGNS P-2 SHORT-TERM RATINGS TO PSA PEUGEOT CITROEN AFFILIATES; ASSIGNS A3 LONG-TERM RATINGS TO BMTN'S; CONFIRMS LONG-TERM RATINGS AT A3
New York, 11-18-97 -- Moody's Investors Service assigned Prime-2 short-term ratings to Societe de Financement des Reseaux Automobiles (Sofira), Peugeot Commercial Paper Gmbh, Peugeot Finance International N.V., Banque PSA Finance Holding, GIE PSA Tresorerie, PSA Financiering Nederland B.V., Peugeot Polska, Sp. zo.o., and Citroen Polska Sp. zo.o., all of which are subsidiaries controlled by the PSA Peugeot Citroen Group (Peugeot). At the same time, Moody's assigned an A3 rating to Peugeot Finance International N.V. and Banque PSA Finance Holding's Bons a Moyen Term Negociables (BMTN) and confirmed the A3 long-term debt ratings of Peugeot's affiliates. The rating assignment reflects both the underlying credit quality of Peugeot as well as its financial services business and incorporates the implicit support by Peugeot of its financial services subsidiaries under the regulatory environment for financial institutions in France. Peugeot's management has consistently maintained a relatively conservative capital structure as well as a moderate risk profile and favorable operating trends in its auto-related portfolio of receivables. The rating actions also reflect the increasing competition in Peugeot's primary auto markets, its concentration in passenger cars and a weakening in Peugeot's financial returns over the past few years.
The ratings assigned include:
Peugeot Finance International N.V. - A3 rated BMTN (domestic medium-term notes) guaranteed by Banque PSA Finance Holding
Banque PSA Finance Holding - A3 rated BMTN
The ratings confirmed include:
Banque PSA Finance Holding -- A3 rated Euro-medium-term note program.
Peugeot Finance International N.V. – A3 rated guaranteed Euro- medium-term notes, and guaranteed Luxembourg franc denominated Eurobonds.
The short term obligations of Sofira, Peugeot Finance International N.V. and PSA Financiering Nederland B.V. are not guaranteed by Peugeot S.A. However, they are guaranteed by Banque PSA Finance Holding which carries implicit parental support by virtue of the bank regulatory environment in France and in the importance of vehicle financing to Peugeot's ongoing business. The rating assigned to Peugeot Commercial Paper Gmbh is based on the guaranty of Peugeot, S.A. while the rating assigned to GIE PSA Tresorerie, which is 100% owned by Peugeot, S.A., is based on the legal recourse creditors of French incorporated GIE in France may pursue against GIE shareholders. The rating assignment for Peugeot Polska, Sp. zo.o. is based on the guaranty of Automobiles Peugeot and the rating for Citroen Polska, Sp. zo.o. is based on the guaranty of Automobiles Citroen .
Peugeot has consistently maintained a low debt profile and its management has demonstrated a prudent approach to financial and operational risks. These will continue to be significant factors in Moody's rating assessment of the company.
Peugeot has a high concentration of passenger cars in its product line-up representing over 85% of its total unit sales with a large portion of these sales in the mid-sized range. While this is the most popular passenger segment in Europe, it is also the most competitive. Peugeot had historically enjoyed a strong position in its home market however as major European countries have moved toward a common market, competitive pressures in the French auto market have intensified. These conditions are not anticipated by Moody's to alleviate in the near or intermediate term. Added to this, France has experienced a severe contraction in auto demand as a result of the expiration of an incentive scrappage program sponsored by the French Government last year. The combination of increasing competitive pressures and a weakness in demand will prevent the company from achieving returns commensurate with its historical average at least over the near term. Peugeot is actively pursuing a cost reduction strategy to improve its efficiency and competitive position. Also, the company is attempting to expand its geographic reach into Latin America, other Western and Eastern European countries as well as in Asia. While both these are positive steps, many of the company's competitors have been already pursuing similar strategies. In Moody's view, Peugeot will experience an increasingly difficult environment and mounting challenges to its efforts to restore its profitability to historical levels which is exerting downward pressure on its long term rating.
Peugeot S. A., headquartered in Paris, is a leading European auto manufacturer and the core company of the PSA Peugeot Citroen Group. Also headquartered in Paris is Peugeot's finance subsidiary Banque PSA Finance Holding and its subsidiary Sofira. Both Peugeot Finance International N.V. and PSA Financiering Nederland B.V are headquartered in Rotterdam, The Netherlands and are finance subsidiaries of Banque PSA Finance Holding. Peugeot Commercial Paper Gmbh, headquartered in Frankfurt Germany, is a special purpose vehicle owned by Automobiles Peugeot, a wholly owned subsidiary of Peugeot S.A. Peugeot Polska, Sp. zo.o. is owned by Automobiles Peugeot and Citroen Polska, Sp. zo.o. is owned by Automobiles Citroen. Both of these subsidiaries are headquartered in Warsaw, Poland.
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